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0 Basics of Gold ETFs: Knowledge of ETF Basics

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Here are the basics of Gold ETFs:

When you buy an ETF (Exchange Traded Fund), you are essentially buying a share in a fund which holds a physical quantity of something traded on an exchange.

If you buy a gold ETF, you are buying into a fund which is supposed to be buying and holding the amount of gold that has been purchased by it’s investors.

Here’s the problem right now:
At the most basic levels of understanding, one can look at the amount of gold (and especially silver) in the world right now, and see that when combined with global consumption and what the banks are reporting they are holding, more shares have been sold in ETFs than actual metals exist above ground.

When you buy a gold ETF, you’re supposed to be able to take physical delivery of your investment, which is the gold. However, our assumption (based on these basics) is that if everyone actually requested their gold today, most gold (and again, especially silver) ETFs would come up hopelessly short, because they aren’t holding what they say they are holding.

Be careful about holding silver and gold ETFs. As the market skyrockets toward volatility and enters the upcoming bubble phase in precious metals, chances are very good that at least some of the larger ETFs will come up short.

Our recommendations instead are to buy physical gold through a company like Apmex, or set up a gold account through a company like GoldMoney.

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